The following is the text of IRS Notice 2001-55. IRS Notice 2001-55
describes the regulations governing rollovers of section 529 plans
and changing the selection of investment options. It permits them
to occur once per calendar year and upon change of a beneficiary.

This notice provides guidance to qualified tuition programs described
in section 529 of the Internal Revenue Code and participants in section 529 programs
regarding the restriction on investment direction described in
section 529(b)(5). This notice sets forth a special rule under which a
program may permit investments in a section 529 account to be changed
annually and upon a change in the designated beneficiary of the
account. Section 529(b)(5) states that a program shall not be treated
as a section 529 program unless it provides that any contributor to, or
designated beneficiary under, such program may not directly or
indirectly direct the investment of any contributions to the program
(or any earnings thereon). The proposed regulations under section 529, which
were published in the Federal Register on August 24, 1998 (63
F.R. 45019), provide that a program does not violate this requirement
if it permits a person who establishes a section 529 account to select among
different investment strategies designed exclusively by the program,
only at the time when the initial contribution is made establishing
the account. Prop. Treas. Reg. section 1.529-2(g).

Several commenters on the proposed regulations suggested that
permitting a participant in a section 529 program to select among various
broad-based investment strategies offered by a program, both at the
time that contributions are made, and at certain other times, would be
consistent with section 529(b)(5). For example, these commenters suggested
that it would be appropriate to allow a change in the investment
strategy selected for an account where there has been a significant
change in market circumstances since the account was initially
established, where there is a change in the designated beneficiary of
an account (as permitted under section 529(c)(3)(C)) and the new beneficiary
has a different expected matriculation date, or where the program
establishes new investment options.

The Internal Revenue Service and the Treasury Department recognize
that there are a number of situations that might warrant a change in
the investment strategy with respect to a section 529 account. Accordingly,
the Internal Revenue Service and the Treasury Department expect that
the final regulations under section 529 will provide that a program does not
violate section 529(b)(5) if it permits a change in the investment strategy
selected for a section 529 account once per calendar year and upon a change
in the designated beneficiary of the account. It is expected that the
final regulations will also provide that, to qualify under this
special rule, a program must (1) allow participants to select only
from among broad-based investment strategies designed exclusively by
the program; and (2) establish procedures and maintain appropriate
records to prevent a change in investment options from occurring more
frequently than once per calendar year or upon a change in the
designated beneficiary of the account. The Internal Revenue Service
and the Treasury Department believe that permitting a change in?2
investment options once per calendar year and upon a change in
designated beneficiary should provide sufficient flexibility to
address concerns raised by commenters.

Section 529 programs and their participants may rely on this notice
pending the issuance of final regulations under section 529.

The Internal Revenue Service invites comments on the matter described
in this notice and any other comments relating to section 529, including the
amendments made by the Economic Growth and Tax Relief Reconciliation
Act of 2001 (Pub. L. No. 107-16, 115 Stat. 38). Please send written
comments by December 24, 2001, to: CC:ITA:RU (Notice 2001-55), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington DC 20044. Submission may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to CC:ITA:RU (Notice
2001-55), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW, Washington DC. Alternatively, taxpayers may submit
comments electronically via the Internet by selecting the "Tax Regs"
option on the IRS Home Page, or by submitting comments directly to the
IRS Internet site at
http://www.irs.gov/prod/tax_regs/regslist.html. Comments will be
available for public inspection.

DRAFTING INFORMATION

The principal author of this notice is Monice Rosenbaum of the office
of Division Counsel/Associate Chief Counsel (Tax Exempt and Government
Entities). For further information regarding this notice contact
Ms. Rosenbaum at (202) 622-6070 (not a toll-free number).